The company says it was forced to rechristen its “Lots of Hugs” bears “Hugalots” because customers feared legal action — from Disney

They may not be able to hug this one out.

A New Jersey toymaker claims that the psychopathic teddy bear villain in “Toy Story 3″ illegally copies its patented snuggling stuffed animals, according to a lawsuit filed Monday in Texas federal court.

Diece-Lisa Industries argues that Lotso, the smiling megalomaniac who makes life miserable for Cowboy Woody and Buzz Lightyear in the 2010 blockbuster, was inspired by its “Lots of Hugs” line of bears. It argues that Disney knew about its products before the film went into production because it licensed its “hugging technology” to the Henson Company to use in its “Bear in the Big Blue House” huggable stuffed bear product. Disney owns the Henson Company, which makes “The Muppets.”

“Defendant [Disney], and its subsidiary, Pixar, decided that this ‘Lots-O’-Huggin” a/k/a ‘Lotso’ character should be the star antagonist of its Toy Story 3 movie, all without the license or authority of Plaintiff DLI,” the suit reads.

Diece-Lisa’s toys are created so they can move their arms in a hugging motion and a website for the products prominently mentions the company’s work on the Disney line of “Bear in the Big Blue House” toys.

The company asserts that in order to minimize brand confusion, it was forced to rechristen its bears as “hugalots” when it worked with customers fearful of a legal threat from Disney.

“Toy Story 3″ went on to make $1 billion at the box office and an additional $7 billion in merchandise, the suit claims, and Diece-Lisa Industries says its entitled to an unspecified share of the profits.

The company is also asking for an injunction preventing Disney from exploiting the Lotso character in the future.

A spokesman for Disney declined to comment and an attorney for Diece-Lisa Industries did not immediately respond to a request for comment.